Watchdog group blasts Jersey City for tax abatement 'giveaways'

Journal file photoJersey City promiscuous use of tax abatements -- like for 77 Hudson shown above -- is depriving the county, schools, as well as the city of cash, according to a report by New Jersey Policy Perspective, a government watchdog group based in Trenton.

Jersey City's liberal use of tax abatements has robbed the city, county and school district of revenue and has saddled residents not living in tax-abated properties with an unfair financial burden, according to a New Jersey watchdog group.

"We're really concerned about the precedent Jersey City is setting," said Naomi Mueller Bressler, co-author of the report released by the New Jersey Policy Perspective last month.

Initially used to give developers an incentive to build in hard-pressed areas, these "tax giveaways" are now handed to "any or all developers," Bressler added.

City officials have traditionally argued abatements are good for the city since the municipality keeps 95 percent of the money, as opposed to a more even split with the county and schools under the rules of conventional taxation. But this report argues the city is also getting hosed in tax abatement deals.

For example, Sugar House, a 65-unit condominium building located 174 Washington St., received a 20-year tax abatement from Jersey City in 1999. In 2007, the owners of the building paid a total of $695,477 to Jersey City.

But if they had paid conventional taxes, they would have paid more than twice that -- $1,627,108. This city would have collected $746,845, the county $413,741 and the Jersey City School District $455,965, according to the report.

And when county and state officials calculate how much money city residents have to kick in to pay for county services and to support local schools, tax-abated property owners aren't included -- putting an additional burden on conventional taxpayers, the reports argues.

There are currently 134 tax-abated properties in Jersey City and 31 more under construction. But with the economy in the dumps, several developers have re-negotiated even sweeter deals with the city, including the CANCO Lofts on Dey Street and Crystal Point, Downtown on Second Street. The city is also considering changing the terms of its 20-year abatement agreement with the owners of 77 Hudson.

The report argues that politicians have become addicted to abatements because "pre-payments" are used to fill budget holes and developers contribute heavily to political campaigns.

The report concedes tax abatements, most of which last 15 to 30 years, can help spur development in parts of the city beyond the waterfront, including Journal Square.

Jersey City Mayor Jerramiah T. Healy -- who campaigned against tax abatements when he first ran for mayor but has become an ardent supporter -- said the watchdog group has blinders on.

"It is astonishing that this report -- which provides no empirical data or quantitative analysis -- does not recognize Jersey City as a model for the judicious use of tax abatements which have dramatically increased property values, led to the creation of thousands of units of affordable housing and thousands of construction and permanent jobs, as well as increased investment and funds into our city coffers," he said in a statement.

"Indeed, Jersey City has been referred to in national publications as a model for urban redevelopment and advancement," he added.

The report makes several recommendations, including:
* Only grant abatements in truly blighted areas
* Open to process of granting abatements to the public
* Limit the percentage of a municipality's revenue that can come from tax abatements so that municipalities don't overly rely on this money to balance budgets
* Limiting abatements to 10 years
* Bar elected officials from granting abatements to developers who have contributed to their campaigns
* Give county and school districts a greater share of the tax-abatement money.

The council is currently considering a redeveloper pay-to-play ordinance that would bar campaign contributions from a developer to local officials if that developer is negotiating to be designated the builder of a project in the city.